Seeking Alpha
Profile| Send Message| ()  

Is your portfolio thirsty for dividends that look vulnerable now but could pay off in the long term?

This is what we're looking for this week and why we focused on finding dividend-paying companies that can ride out the current economic storm with a strong current ratio until better times come.

Why focus on the Current Ratio specifically, you ask?

The Current Ratio is a liquidity ratio that illustrates a company's ability to pay back short-term obligations. The higher this financial metric is the easier it for company manages its obligations generally. Now a ratio under 1 indicates that the company cannot pay off all its obligations if they all came due at once. Although this screams red flag, it doesn't mean the company is doomed for bankruptcy either. The take away here is that reviewing a dividend stock's Current Ratio is a smart starting point when doing one's due diligence.

Now how do you take advantage of a market that is probably more unpredictable than a leisurely stroll through Mogadishu on a Monday morning?

We did this by running a screen for dividend stocks that have underperformed in the S&P 500 over the last 3-Months and that are now offering a dividend yield of at least 3%. From this shallower pool we then screened for companies have a Current Ratio of 3 or higher. Finally, we focused on dividend paying stocks that are now trading at cheaper valuations (Forward P/E equal to or less than 10) in the hope of potentially identifying a few hidden gems.

The Forward P/E Ratio ranks the companies from highest to lowest:

1. Guangshen Railway Company, Ltd (GSH)

Sector

Industrials

Industry

Railroad

Market Cap

$ 2,210M

Price (01/20/2012)

$19.29

The company has fallen -22.47% over the last 3 months while the S&P 500 has fallen by -1.07%. Today GSH's Current Ratio stands at 2.17. The company's Dividend Yield is currently 3.87% and now trades with a Forward P/E ratio of 9.87.

2. Applied Materials, Inc. (AMAT)

Sector

Technology

Industry

Semiconductor Equipment & Materials

Market Cap

$13,471M

Price (01/20/2012)

$10.51

The company has fallen -9.94% over the last 3 months while the S&P 500 has fallen by -1.07%. Today AMAT's Current Ratio stands at 2.37. The company's Dividend Yield is currently 3.14% and now trades with a Forward P/E ratio of 9.76 thanks to some overzealous bears.

3. Intel Corp (INTC)

Sector

Technology

Industry

Semiconductors

Market Cap

$128,391M

Price (01/20/2012)

$25.52

The company has fallen -6.78% over the last 3 months while the S&P 500 has fallen by -1.07%. Today INTC's Current Ratio stands at 2.13. The company's Dividend Yield is currently 3.29% and now trades with a Forward P/E ratio of 9.71 thanks to some overzealous bears.

4. Commercial Metals Company (CMC)

Sector

Basic Materials

Industry

Steel

Market Cap

$1,476M

Price (01/20/2012)

$12.70

The company has fallen -9.53% over the last 3 months while the S&P 500 has fallen by -1.07%. Today CMC's Current Ratio stands at 2.45. The company's Dividend Yield is currently 3.78% and now trades with a Forward P/E ratio of 8.19 thanks to some overzealous bears.

5. Blackstone Group LP (BX)

Sector

Financial Services

Industry

Asset Management

Market Cap

$6,727M

Price (01/20/2012)

$13.15

The company has fallen -5.02% over the last 3 months while the S&P 500 has fallen by -1.07%. Today BX's Current Ratio stands at 6.30. The company's Dividend Yield is currently 3.95% and now trades with a Forward P/E ratio of 7.63 thanks to some overzealous bears.

6. Freeport-McMoRan Copper & Gold (FCX)

Sector

Basic Materials

Industry

Copper

Market Cap

$32,052M

Price (01/20/2012)

$33.77

The company has fallen -9.28% over the last 3 months while the S&P 500 has fallen by -1.07%. Today FCX's Current Ratio stands at 3.51. The company's Dividend Yield is currently 3.33% and now trades with a Forward P/E ratio of 6.66 thanks to some overzealous bears.

7. Sasol, Ltd. (SSL)

Sector

Energy

Industry

Oil and Gas Integrated

Market Cap

$28,211M

Price (01/20/2012)

$41.95

The company has fallen -10.48% over the last 3 months while the S&P 500 has fallen by -1.07%. Today SSL's Current Ratio stands at 2.13. The company's Dividend Yield is currently 4.64% and now trades with a Forward P/E ratio of 6.57 thanks to some overzealous bears.

We hope this list helps as investors do their own due diligence and research on dividend stocks.

Disclaimer: The thoughts, opinions, and statements here are not to be taken or construed as investment advice directed toward any individual and or entity.

Source: 7 Cash Heavy Dividend Stocks That Could Snatch Victory From The Jaws Of Defeat